In­dus­try’s post-lock­down puffery dis­torts re­al­ity of the ur­ban hous­ing scene

Vancouver Sun - - FRONT PAGE - DOU­GLAS TODD

Com­ing out of COVID-19 lock­down, real­tors are trum­pet­ing a hot mar­ket that has buy­ers jump­ing in with both feet to pay record prices. But don’t be­lieve it, says the CHMC’S Evan Sid­dall. Real­tors are ex­ag­ger­at­ing the strength of the mar­ket, he says, and the truth could leave young, first-time home­buy­ers hold­ing the bag.

You can be for­given for feel­ing per­plexed about what’s hap­pen­ing to Metro Van­cou­ver’s real es­tate mar­ket af­ter al­most six months of COVID-19 anx­i­ety and vary­ing de­grees of lock­down.

The spin com­ing from the real es­tate in­dus­try is be­wil­der­ing — with some real­tors say­ing the mar­ket is “hot” and “fan­tas­tic.” Some agents say B.C. buy­ers are “jump­ing in with both feet,” ac­tiv­ity is “up dra­mat­i­cally,” numbers are “record set­ting” and prices are “20 per cent higher year over year.”

Alas, the hype from cer­tain seg­ments of the in­dus­try con­firms why polls show the pub­lic gen­er­ally has a low opinion of real­tors. In­sights West re­cently dis­cov­ered only 47 per cent of Cana­di­ans have a pos­i­tive view of real es­tate agents, much lower than their trust in po­lice, teach­ers and even jour­nal­ists.

Metro Van­cou­ver hous­ing prices, for in­stance, are def­i­nitely not up 20 per cent on av­er­age over last year, de­spite what you can read on the in­ter­net.

Still, the real es­tate in­dus­try’s re­cent post-lock­down puffery is not en­tirely wrong. Pock­ets of pent-up de­mand ap­pear to be show­ing in Metro Van­cou­ver’s mar­ket, par­tic­u­larly in de­tached homes in the sub­urbs.

But many an­a­lysts be­lieve real­tors are in gen­eral ex­ag­ger­at­ing the strength of the mar­ket, torquing trends to make people be­lieve this is the time they must buy. There are still rea­sons that the clas­sic 1954 book, How to Lie With Statis­tics, re­mains a best­seller.

It is wise to fo­cus on the de­tails of this pan­demic hous­ing mar­ket, since it’s seg­ment­ing.

For in­stance, the city’s high­end prop­erty de­vel­op­ers should be ner­vous th­ese days, since the condo pre­sale mar­ket, which has nor­mally at­tracted a flood of do­mes­tic and off­shore in­vestors, is in dan­ger of col­laps­ing. And many people who had been hold­ing condo apart­ments as in­vest­ments, which tra­di­tion­ally has been al­most half of all units, are try­ing to un­load their units.

The head of the Canada Mortgage and Hous­ing Cor­po­ra­tion, Evan Sid­dall, is among those telling Cana­di­ans to be wary of mar­ket­ing pro­pa­ganda. He went on Twit­ter on Wed­nes­day to de­bunk a boos­t­er­ish mag­a­zine ar­ti­cle quot­ing in­dus­try play­ers talk­ing about an al­legedly siz­zling hous­ing mar­ket. Sid­dall warned: “It’s bet­ter to heed the ad­vice of ob­jec­tive voices, not ‘ex­perts’ who earn fees on house prices.”

In May, Sid­dall echoed the warn­ings as sev­eral banks pre­dicted a nine to 19 per cent re­duc­tion in Canada’s hous­ing prices over the next year or more, with Greater Toronto and Van­cou­ver suf­fer­ing the worst. Prices would drop, Sid­dall forecast, be­cause of Covid-19-in­cited un­em­ploy­ment, a dra­matic jump in the num­ber of people not be­ing able to pay their mort­gages and grow­ing house­hold debt.


But this year’s Covid-in­duced de­vel­op­ments need to be un­der­stood in the con­text of how Metro Van­cou­ver’s hous­ing mar­ket has over the decades be­come a strange beast.

It’s been glob­al­ized since the 1980s, which is why in Jan­uary De­mographia In­ter­na­tional Hous­ing In­ven­tory dubbed it the sec­ond-most un­af­ford­able mar­ket out of more than 340 cities around the world, with Hong Kong first and Syd­ney third. The ra­tio of Metro Van­cou­ver hous­ing prices to av­er­age lo­cal wages was a devastatin­g 12 to one. A four to one ra­tio is con­sid­ered “af­ford­able.”

In the midst of such bad news, COVID-19 has thrown a wrench into the real es­tate ma­chines op­er­at­ing in Metro Van­cou­ver, Canada and parts of the de­vel­oped world.

Pan­demic re­stric­tions not only took the wind out of the mar­ket for about four months, they forced real­tors to re­sort to chang­ing what they do and, for in­stance, of­fer vir­tual “open houses.” More im­por­tantly, An­gus Reid poll­sters say COVID-19 has wal­loped the earn­ings of more than two out of five Cana­dian house­holds. The pan­demic has also largely closed Cana­dian bor­ders to transna­tional mi­grants, some of whom used to come with cap­i­tal that helped fuel big-city hous­ing prices. For­eign vis­i­tors to Canada are now down to next to noth­ing. And the numbers of new im­mi­grants (350,000 last year) and in­ter­na­tional stu­dents (645,000 last year) have been cut roughly in half.

Cana­dian real es­tate buy­ing and sell­ing pat­terns have been rad­i­cally dis­rupted, but Sid­dall has felt forced to de­fend why his medium-term pre­dic­tion of sharply fall­ing prices is not nec­es­sar­ily pan­ning out in the short term, par­tic­u­larly in June and July. He has felt it nec­es­sary to re­mind ev­ery­one that one in five Cana­dian house­holds could de­fault on their mortgage pay­ments if the econ­omy doesn’t re­bound.

Sid­dall is also among the many an­a­lysts crit­i­ciz­ing the fed­eral Lib­er­als for do­ing too much to stim­u­late the hous­ing in­dus­try — ar­guably the coun­try’s big­gest eco­nomic sec­tor — by of­fer­ing ex­tremely low mortgage rates and by stand­ing by as the Bank of Canada rapidly prints money to en­cour­age spend­ing.

Sid­dall wor­ries the fed­eral Lib­er­als’ hy­per-pro­mo­tion of home own­er­ship is cre­at­ing an un­sus­tain­able debt bub­ble, which, when it bursts, will even­tu­ally push prices much lower.

“The prob­lem is that we’re in a game of mu­si­cal chairs and when the mu­sic stops play­ing, it’ll be young first-time home­buy­ers who are hold­ing the bag.”

Amid this, there are signs pentup de­mand has re­cently come into the hous­ing mar­ket, with the Real Es­tate Board of Greater Van­cou­ver re­port­ing a 28 per cent in­crease in sales in July com­pared with a year ear­lier. It looks as if some who had been pre­par­ing to buy in the spring have de­layed their de­ci­sions to this sum­mer.

And what’s es­pe­cially dif­fer­ent — blame COVID-19 — is that an­a­lysts say there is a small but sig­nif­i­cant uptick in people, pre­sum­ably those who have not lost their jobs, mov­ing out of the ur­ban core. Some are buy­ing de­tached houses in the sub­urbs with the idea that they need larger homes if they’re go­ing to have to work out of them. Many em­ploy­ers might be get­ting used to their staff telecom­mut­ing.

At the same time, con­dos in the city core are not sell­ing par­tic­u­larly well. Even though there are now more than 1,200 con­do­minium tow­ers in Van­cou­ver, Burn­aby and North Van­cou­ver — and roughly one-third of the re­gion’s pop­u­la­tion lives in a strata unit — there is a dis­tinct pos­si­bil­ity that par­tic­u­lar con­struc­tion craze might have topped out.


Ray­mond Wong, who has lived in Greater Van­cou­ver all his life, has made it his av­o­ca­tion to be­come in­formed about the hous­ing mar­ket, es­pe­cially since 2015 when he at­tended an open house and asked the real­tor how lo­cals could pos­si­bly af­ford to get into it.

“She re­sponded: ‘This is not a lo­cal mar­ket. This is a for­eign mar­ket,’” says Wong, an en­gi­neer.

“I have a seven-year-old son and I do worry about one day how, or if, he could sur­vive in Van­cou­ver. I worry that one day my son would be forced to move away from me, and not by choice.”

In ad­di­tion to Wong’s long­time con­cern that “over­seas money has been com­ing into the mar­ket,” he be­lieves his son in the fu­ture will be up against stub­bornly stag­nant Metro Van­cou­ver wages and “will have to worry about hy­per­in­fla­tion, since Ot­tawa is print­ing money and pro­vid­ing low in­ter­est rates.”

The young are es­pe­cially hurt­ing in re­gards to wages since COVID-19 hit in March. A quar­ter of Cana­di­ans be­tween 25 and 30 years old have lost their jobs or been put on un­paid leave be­cause of the pan­demic, ac­cord­ing to a sur­vey by Deloitte Canada. Only about a third of Cana­di­ans be­tween age 25 and 40 said their em­ploy­ment and in­come were un­af­fected by the COVID-19 shut­down.

With the coro­n­avirus wreak­ing eco­nomic havoc un­evenly, Wong said pro­fes­sion­als gen­er­ally ap­pear to be do­ing much bet­ter than young people, blue-col­lar and re­tail workers.

“Many pro­fes­sion­als liv­ing in down­town Van­cou­ver re­al­ize they don’t need to live close to work any­more. They are work­ing from home on their com­put­ers and want a larger space. This is prob­a­bly one of the rea­sons we are see­ing a down­turn in down­town con­dos,” Wong said.

“I feel this is the new norm, and that’s why there’s been an uptick in sin­gle-fam­ily homes, par­tic­u­larly the starter ones. It seems sin­gle-fam­ily homes are sell­ing as far out as Chilli­wack. And this is not hap­pen­ing just in Greater Van­cou­ver, but across Canada as well.”

Vet­eran Toronto hous­ing an­a­lyst John Pasalis con­curs. He’s found data show­ing that the semi-ru­ral sub­urbs of Toronto are ex­pe­ri­enc­ing much stronger sales than the core of Canada’s largest city, which, like Van­cou­ver, has also been at­trac­tive to global in­vestors seek­ing a place to park their wealth.

“I think what we are see­ing in Toronto and Van­cou­ver is a POST-COVID be­havioural shift away from con­dos and to­wards low-rise (sub­ur­ban) homes. It’s not a mass ex­o­dus, but it’s an im­por­tant trend to keep an eye on be­cause I think it will be with us for a while,” Pasalis says.

Van­cou­ver hous­ing an­a­lyst Steve Saret­sky tends to agree. “Hous­ing sales are on the rise, and so too are prices, at least for sin­gle-fam­ily homes on the out­skirts of the city.”

This week the Fraser Val­ley Real Es­tate Board, which in­cludes Sur­rey, Langley and Mis­sion, says its “bench­mark” price of a sin­gle-fam­ily de­tached home rose to $1 mil­lion.

It says that’s a hike of 5.3 per cent com­pared to July 2019, which is about the same rate of in­crease in the rest of Metro Van­cou­ver.

Even though the real es­tate as­so­ci­a­tions say this sum­mer’s sales vol­umes and prices have be­gun sur­pass­ing lev­els in 2019, an­a­lysts point out that 2019 was a down year.

For the first time in decades, money earned off­shore is ap­par­ently not a ma­jor fac­tor perk­ing up the Metro Van­cou­ver mar­ket.

“It’s cheap credit, not for­eign buy­ers, driv­ing the re­bound in hous­ing ac­tiv­ity across the prov­ince of B.C.,” Saret­sky told fol­low­ers in a Thurs­day tweet.

“Armed with record low mortgage rates and a sea of liq­uid­ity, Cana­di­ans are do­ing what they do best — bor­row­ing money to buy real es­tate,” Saret­sky said in a re­cent re­port.

He ex­pressed grave con­cerns the Bank of Canada is “run­ning in over­drive” to print new money and sup­port mortgage bonds.

Such pol­icy moves will help Cana­di­ans who al­ready own real es­tate as­sets, Saret­sky said, but they will fur­ther harm the “havenots.”

The ap­par­ent turn to de­tached homes in Greater Van­cou­ver is not push­ing over­all prices higher com­pared to the boom years.

Stephen Pun­wasi, a prom­i­nent Cana­dian mar­ket an­a­lyst and di­rec­tor of Bet­ter Dwelling, re­cently said, “Greater Van­cou­ver real es­tate sales are re­turn­ing to pre-pan­demic lev­els, but prices are still fall­ing” com­pared to their over­all peak a cou­ple of years ear­lier.

Most an­a­lysts owe the drop in 2019 at least in part to the cu­mu­la­tive ef­fects of the B.C. gov­ern­ment’s 20 per cent for­eign-buy­ers tax, as well as its spec­u­la­tion and va­cancy tax, which tar­gets “satel­lite” house­holds in which bread­win­ners earn most of their wealth off­shore but pay min­i­mal Cana­dian in­come taxes.

De­spite the slight June-july up­turn in sales of de­tached homes in Greater Van­cou­ver and the Fraser Val­ley, the vol­ume of sales is still al­most half what it was in 2016. And the av­er­age price for a de­tached home in July in the north of the Fraser parts of Metro was about $1.6 mil­lion. That is ex­cep­tion­ally high com­pared to most cities around the world, but it’s be­low the peak of $1.83 mil­lion three and four years ago.

The lux­ury sin­gle-fam­ily mar­ket is not what it was ei­ther. In many neigh­bour­hoods of West Van­cou­ver, for in­stance, where typ­i­cal home prices of $4 mil­lion to $7 mil­lion were un­til re­cently driven largely by buy­ers with off­shore cap­i­tal, as­sessed val­ues have fallen on av­er­age by onethird in the past two years.

Across Metro Van­cou­ver, data shows June and July sales are some­what higher than last year’s lev­els.

“But de­spite the in­crease,” Pun­wasi said, “new list­ings are hit­ting the mar­ket at such a rapid pace, prices are ac­tu­ally fall­ing fur­ther from the peak. It’s not in­cred­i­bly straight­for­ward, but not com­pli­cated ei­ther.”

And the longer view is not pretty, Pun­wasi sug­gests. Cana­dian banks are now re­spond­ing to COVID-19 by al­low­ing 16 per cent of their mortgage hold­ers to de­fer their monthly pay­ments, a rate dou­ble that in the U.S.

It might just be a mat­ter of time be­fore many strug­gling with mortgage debt are forced to sell.


Buy­ers are not as keen as they once were on the city’s of­ten­shiny condo apart­ment tow­ers, which have be­come the most ob­vi­ous sym­bol of Metro Van­cou­ver’s boom.

Their pres­ence once led au­thor Dou­glas Cou­p­land to write a book about the city ti­tled City of Glass.

“I think there is less de­mand for condo tow­ers now, since many people who buy in condo tow­ers are in­vestors,” said Wong.

“So, with Airbnbs not do­ing well here, and people los­ing jobs and rents com­ing down, many people who own condo units want to sell.”

An ex­cep­tional num­ber of con­dos, 2,964, flooded into the mar­ket in July.

“Greater Van­cou­ver has seen its big­gest sin­gle-month surge of in­ven­tory in half a decade,” Pun­wasi said in a re­cent anal­y­sis. “Ev­ery­body had the same idea — sell, in June. … New list­ings are hit­ting the mar­ket at such a rapid pace it’s killing price gains.”

In July, the Real Es­tate Board of Metro Van­cou­ver re­ported that condo apart­ment prices in July were av­er­ag­ing $680,000. That’s down from a peak of $740,000 two years ear­lier.

Given the muted condo scene in Metro Van­cou­ver, Pun­wasi also noted that “pre­sales” of yet-to-be-built units had been down 50 per cent in June from the same month last year. Many de­vel­op­ers, he says, are hold­ing off on start­ing con­struc­tion projects.

It’s hard to keep track of the many di­verg­ing shifts im­pact­ing the Cana­dian hous­ing mar­ket. There are so many changes in the age of COVID-19 that even an­a­lysts such as Saret­sky have been known to say the re­al­ity some­times seems “im­pen­e­tra­ble.”

De­spite the way the de­tached fam­ily home mar­ket is func­tion­ing dif­fer­ently from the condo apart­ment mar­ket, Wong is among those who is not op­ti­mistic about what he con­sid­ers the bot­tom line: Whether Metro Van­cou­ver will be­come af­ford­able in the fu­ture, in­clud­ing for his son.

“Our gov­ern­ment is not do­ing us any favours,” said Wong, who has felt com­pelled to join Hous­ing Ac­tion for Lo­cal Buy­ers, an eth­ni­cally di­verse group of Bri­tish Columbians who ad­vo­cate more af­ford­able hous­ing for or­di­nary people.

With the fed­eral gov­ern­ment “print­ing bil­lions of dol­lars” and banks of­fer­ing ex­tremely low-in­ter­est credit, Wong be­lieves “at the end of the day the money will work its way to the ul­tra-wealthy and they will park their money in real es­tate.”

That will not help most young fam­i­lies.

COVID-19 has hugely com­pli­cated the ur­ban hous­ing scene. Re­gard­less of its chaotic im­pact, it seems clear a range of reg­u­la­tory ac­tion will still be needed to help make Metro Van­cou­ver hous­ing af­ford­able for many of those who live and work here.

It’s bet­ter to heed the ad­vice of ob­jec­tive voices, not ‘ex­perts’ who earn fees on house prices.



Ray­mond Wong, who has long fol­lowed the Metro hous­ing mar­ket, wor­ries that his son, now 7, will “be forced to move away from me” one day due to un­af­ford­able hous­ing.


Condo tow­ers dom­i­nate the city sky­line, but the pan­demic has helped to tar­nish their lus­tre. Ob­servers say there is less de­mand with fewer in­vestors and people los­ing their jobs dur­ing the pan­demic. An ex­cep­tional num­ber of con­dos, 2,964, flooded the mar­ket in July.

Stephen Pun­wasi

Hous­ing an­a­lyst Steve Saret­sky wor­ries the Bank of Canada is “run­ning in over­drive” to print money and sup­port mortgage bonds. Such a move will fur­ther harm the “have-nots,” he says.

Evan Sid­dall

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